W. Christian Riedel, a resident of Ohio, had an account with Unibanco, S.A., and asked that it transfer $100,000 to Banca Metropolitana, S.A. (Bamesa) (predecessor to Bancam) for investment in a certificate of deposit (CD). Bamesa merged with another bank to form Bancam, and Mr. Riedel's CD was renewed with the newly merged bank.
Shortly after Mr. Riedel's renewal, the government of Mexico issued new rules governing accounts from foreigners in Mexican banks. The rules required the banks to pay the CDs in pesos at a rate that was substantially below exchange rates. A month after these rules were put into effect, Bancam was nationalized.
When Mr. Riedel's CD came due, the exchange rate was 74.34 pesos to the dollar. He was paid $53,276.23 for his $100,000 investment.
Mr. Riedel brought suit in a U.S. federal district court, alleging that Bancam had violated both federal and Ohio securities laws in selling the CDs in the United States without registration. Bancam filed a motion to dismiss the suit on the grounds that the Sovereign Immunities Act of 1976 precluded U.S. courts from taking jurisdiction over the matter. Bancam also claimed protection under the act of state doctrine. The district court dismissed Mr. Riedel's suit on the grounds that it lacked jurisdiction over the claims under Ohio law and on grounds of sovereign immunity and the act of state doctrine. Mr. Riedel appealed. Is the court correct on the application of sovereign immunity? Are there any distinguishing factors in this situation? [ Riedel v. Bancam, 792 F.2d 587 (6th Cir. 1986).]